Real Estate Bubble Confirmed With Shopping Centers With Grocery Store Anchor

Crain's Chicago Business reports:

There's one Mariano's Fresh Market item that's selling briskly these days: the buildings the grocery store chain leases.

Commercial real estate investors have shown an insatiable appetite for Mariano's stores or shopping centers anchored by the grocer. Since the start of 2014, investors have spent more than $300 million on the properties. And they are paying such high prices that the developers that built shopping centers anchored by Mariano's stores are cashing out for fat profits.

While many retail properties in the suburbs have struggled to recover from the recession, Mariano's stores have emerged as a diamond in the rough.

With interest rates low and institutional investors seeking to deploy huge piles of cash, several developers have been putting their Mariano's properties up for sale as quickly as they can finish construction.

“This is a unique market,” says John McLinden, managing partner of Chicago-based developer Centrum Partners, which in May sold Skokie Commons, a retail center anchored by a Mariano's, for $48.5 million to Chicago-based JLL Property Income Trust. “You absolutely have to look at selling.”

More than one-third of Mariano's 32 stores have been sold since 2011, and others are on the market in Chicago's Lakeview neighborhood and in the suburbs of Glenview, Northbrook, Frankfort and Harwood Heights.

Not that you need to be shopping one to attract offers.


“We get calls every single day,” says Tom Engberg, CEO of Loja Real Estate, a subsidiary of Loja Group, which bought two Mariano's in the city and another in Park Ridge in late 2014. “This market is so brisk, it's almost ridiculous.”

The best theory on why the business cycle happens confirms this.